Spilled milk.Dairy farmers are in deep trouble. Milk prices have fallen by half since last year, dropping to a 30-year low. Consumption has fallen in light of the slowing world economy and now there is a huge milk surplus, or so the “experts” tell us.

It’s a nice theory: surplus equals low prices. Easy to explain and easily accepted by farmers. Farmers want an explanation, they listen to the dairy ”experts.” They drink the Kool-Aid.

Milk prices, like the rest of the world economy, crashed because of a globalized, unregulated free market system, not because of surplus product. According to New York dairy farmer/market analyst John Bunting “dairy markets are run by an oligarchy — a few elite players — with little or no government oversight”. The parallels between the current dairy price crash and the Wall Street financial crash are pointedly exact.

Both crashes were engineered by the same sort of folks, those who promised us they had the Midas Touch but were, instead, bulls in the china shop.

Just as Wall Street investment bankers took advantage of the removal of regulatory safeguards put in place by the government after the 1930’s depression, so did the “elite players” of the dairy industry take advantage when the US Congress scraped parity dairy pricing in 1981.

Until 1981 as Bunting shows, farm and consumer milk prices were perfectly correlated. Since 1981 (according to the Bureau of Labor Statistics) inflation adjusted farm prices have steadily fallen while consumer prices have steadily risen.

Increased 2009 first quarter earnings of Kraft Foods (up 29%) and Dean Foods (up 39%) came, according to The Milkweed, “from dairy farmers’ grief”.

If US dairy farmers are overproducing, why are imports of dairy product constantly rising? The National Milk Producers Federation notes “In the past 10 years alone, the value of dairy imports sold in the U.S. has expanded from $800 million, to nearly $3 billion”.

  • Why have cheese imports increased in the first quarter of 2009 over 2008? Or as Bunting notes, how can free falling milk prices be justified by the following data?

  • Nearly as much nonfat dry milk was exported in December 2008 as was exported in December 2007.
  • December 2008 imports of milk protein concentrates were massive.
  • Imports of casein, another dairy derived protein, also increased in December 2008.
  • “Butter and other milkfats” imports increased nearly 60% in December 2008 compared with December 2007.
  • Cheese imports for December 2008 increased 15% over December 2007.
  • Commercial disappearance of dairy products increased in December 2008 and for the 2008 year increased 2.6% according to USDA data.

Just as US corporations shipped jobs to low wage workers overseas, Kraft and Dean Foods welcome the products of lower wage overseas farmers. Just as low priced foreign textiles, electronics and auto parts put US workers out of their jobs, so are foreign farm imports putting US farmers out of business.

Clearly, supply and demand does not control farm prices, nor do low priced imports mean lower consumer prices. Just as in the financial sector or the manufacturing sector, prosperity is intentionally funneled to the top at the misery and expense of the workers and taxpayers.

Government regulation on behalf of the worker and consumer appears to be non-existent. Yet we continue to listen to the economists, the corporate oligarchs and Congress who keep telling us prosperity is just around the corner, globalization and the free market will deliver us all.

More kool-aid anyone?